Tuesday , 17 October 2017

Abu Dhabi issues cryptocurrency and ICO regulations

Abu Dhabi’s Financial Services Regulatory Authority (FSRA), have released guidelines on ICOs and digital currencies for the first time. Their stance on ICOs is that they are similar to securities and are risky, while digital currencies are seen more like commodities.

Many nations are starting to crack down on ICOs, with differing levels of regulations. Some, like China, have totally banned them, while others are being more friendly.

ICO securities

“The ICO market is incredibly diverse in terms of quality, there are some ICOs which constitute high risk,” said Christopher Kiew-Smith, head of fintech strategy at the FSRA. “The disclosures are not there, there are no financial statements, those are extremely high risk for those seeking returns.

Under the new guidelines, companies wishing to organize an ICO are now mandated to approach the FSRA where the authority will determine if the token offering is to be regulated as a security. If the FSRA determines the token falls outside the definition of a security, the token offering will remain unregulated.

The FSRA underlined ICOs as “a novel and potentially more cost-effective way of raising funds for companies and projects.” Altogether a decidedly contrasting approach to the likes of China and South Korea who imposed blanket bans on ICOs.

FSRA chief executive director Richard Teng stated:

“ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation. Participants exploring the issuance of ICOs that offer real value to the market and wish to operate within our regulatory framework are encouraged to engage us early to gain insights into the applicable regulatory regime.”

Cryptocurrency commodities

The financial watchdog, the FSRA, also said it would not consider digital currencies legal tender, rather class them as commodities, such as precious metals or fuels. Therefore, they remain unregulated.

It is a big score for digital currencies that are already established, and it seems to hint at the fact that Abu Dhabi is trying to strike a balance. They want to protect their citizens from the dangers of ICOs, but they are open to letting the digital currency market flourish unhindered.

Neighboring emirate Dubai, for example, recently issued a warning about ICOs and said that it does not regulate them. Dubai has also issued its own state digital coin.

Could still regulate in the future

The FSRA said that it is currently talking to the Japanese Financial Services Agency about how it has gone about regulating Bitcoin. Abu Dhabi’s authorities said it is not ruling out bringing virtual currencies under its regulatory remit.

“For us, we do see a lot of challenges in regulating something which was designed not to be regulated. We recently established a fintech reach with the Japanese FSA, and through such cooperation we hope to see how they regulate these and if there are risks they see,” Wai Lum Qwok, executive director of capital markets at the FSRA, said.

 

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